So, I thought that to start, maybe we could just introduce ourselves a little bit more in terms of what exactly we do in the ecosystem. Hmm, as Kartik said, I'm the Chief Investment Officer of Sharplink, and last year we put about $3 billion in Ethereum on our public company balance sheet and then started putting it on the blockchain. So I'm the chief investment officer. This means that I am focused on how we can achieve the best possible Ethereum-denominated returns and returns, taking into account risk. In many ways, this means that we are dealing with the first cases, which we will discuss later.
Um, but I'm happy to talk to you. Robbie, would you like to introduce yourself? Matt, did you lose your voice this weekend, or was it the second Friday night game for the Knicks? Nicks and four. Good.
Hmm, Robbie Mitchnik. I'm the Global Head of Digital Assets at BlackRock, where I've been working since 2018, when I joined the firm to figure out what this whole world of blockchain and cryptocurrencies means and what its implications are for BlackRock. And, um, over time, um, we obviously got more and more into this space, um, and, um, Ethereum is a big part of it. So, to get straight to the point, I mean, the point, I mean, BlackRock launched the two largest crypto ETFs in history, so you launched Bitcoin in early 2024, then Ethereum, it was IBID and EA, and then you settled on Bitcoin and Ether, and I would like to understand what the logic was? What distinguished these two assets?
Well, I think we've been , um, pretty consistent in this space in terms of how we've articulated the approach and how we've thought about that approach in practice. Um, there's a very high bar for us to build, um, an Eyeshares product, um, around an asset, especially in a new asset class like this. So, it was a multi-year journey that we went through as a firm that led us to the creation of Bitcoin, which of course became IBIT. And, uh, it was also a big decision to expand this and get into ETH, and we had to make a decision about ETH even before IBIT launched. So people believed that, you know, what I and others said would really work, would really work, and obviously, in the end, it did .
But many questions arise here. It's not just about whether we can sell the product. Absolutely not. Is this product mature enough ? Does it have scale in terms of market capitalization and liquidity?
Is it mature in its product, market-relevant both from an economic use case and investor perspective? Is this something that, perhaps more than anything, we can say with a straight face that this is an asset that, uh, belongs in a client portfolio, uh, on a long-term fundamental basis. And so, uh, I really think that over time, there will be more crypto assets more crypto assets that will reach that level. But today, you know, it's obvious that there's a first category in cryptocurrency, which is Bitcoin. There's a second category, which consists of Bitcoin and ETH, and then there's, uh Bitcoin and ETH, and then there's, uh , a kind of tipping point.
And, uh, I think ultimately, it's good for this space if this number of, uh, you know number of, uh, you know , reliable, mature, large- scale assets grows. But now, uh, it was Bitcoin and Ethan, and on purpose Bitcoin and Ethan, and on purpose . Yeah, I mean I definitely agree that Ethereum is a unique asset, but I'm curious, so to distinguish the network from the token, what about Ethereum itself and other programmable layers? Do you see Wall Do you see Wall Street reacting differently to this, and was that part of the decision to launch ETH and then pause? Yes.
Yes. So I think if you consider traditional financial firms and their preferences, I think there's a strong indexing towards, uh, maturity in terms of time in existence, provenance, usage, and, uh, functioning in a reliable way. Um, things that are new and exciting tend to be more readily accepted by other parts of the crypto ecosystem. Sometimes this is not without reason. Other times, uh, maybe it doesn't take into account some of the risks that exist.
I'm thinking about Zcash, which has been one of the hottest, uh, assets in cryptocurrency for many months and is essentially going through one vulnerability. The longer things are used, accepted, and tested in battle, the more important they are. Perhaps another element is that from a traditional financial perspective there is a real understanding of the importance of network effects and the benefits that this provides. And it's clear that Ethereum, you know, even facing tradeoffs in terms of design compared to other layers, has a huge advantage in terms of network effects and position, and trivial firms see that as important. So I-uh, I mean I'm also interested in your opinion on this.
Obviously, you've thought a lot about Ethereum's role in the ecosystem from a Sharplink perspective. Was there any one moment or one specific inflection point where you started to see ETH as, you know, a truly institutional asset to build around? I would say it was not so much about an isolated moment as it was about the consistency and stability of the path forward. There is very little headline-chasing in the Ethereum ecosystem. And that's essentially what Wall Street needs.
When you're building a long-term roadmap, it's not about announcing one shiny object for the sake of announcing it. And as we continue to see Wall Street build on blockchain, they continue to choose Ethereum over and over again. And as we see Ethereum building its roadmap, they continue to do what is best for the next 5-10 years. And we benefit from the fact that they took this approach 5 years ago, rather than chasing shiny objects now, and in 5 years we will benefit from what they are doing today to build this long-term roadmap. It's always been important to me that we're building infrastructure, and civilization- level technology is a step beyond what Wall Street needs.
No one else tries to achieve this level of rigor. And I think that's important because there's a certain level of trust that you build with the community when you're not chasing headlines. When I see a headline that a see a headline that a new bank or large institution has decided to place their tokenized fund on Ethereum, it makes sense to me. End of conversation. When I see they chose L1, who I haven't heard from in a year or two, the first thing I think about is how much they paid them.
It is a completely different thing to be elected on merit and based on economic criteria. And people chose Ethereum for its merits. And that was always what fascinated me about this space, was that they seemed to stand on their own. I think that's one of the things you really need to pay attention to in this space: when there's a use, that's one thing use, that's one thing , but where's the use that doesn't happen with a specific and temporary economic incentive economic incentive ? Because obviously, uh ?
Because obviously, uh , there's a lot of that in the cryptocurrency and DeFi ecosystem. When we start to see usage where there is a real problem being solved, real economic unlocking happening, regardless of regardless of any incentives, that's a really important signal. Yes, absolutely. The great news is news is that 80% of the work is finding someone to lay the pipelines. So if someone else subsidizes it and then the institution gets connected to the chain, it's very easy to switch.
The activation energy is already happening. But going back to BlackRock, you launched ETH A and it was a hugely successful ETF and then recently in March you started putting assets but you created a new ETF called ETHB and I'm wondering why you did n't just put assets out of ETH A? For example, why do we have two separate products? What are you focusing on? Yes, we were lucky there, somewhat uniquely, where ETH was at such scale and we were able to have the success that we have with our crypto ETPs, that it was actually likely to create two products.
I think if we were a smaller issuer, it would be difficult. And the reason we can create two products is because it caters to different investors with different preferences, right? So we give investors this choice. Uh, for most long-term, uh, investors in ETH, we certainly think that ETHB, the new product, as you mentioned, that was launched in March and that has already performed quite well, uh, half a billion assets under management, uh, that's good for a new ETF that's good for a new ETF , uh, that B will be a better tool for most because they get that staking yield. For an investor who is just hypersensitive to liquidity and wants maximum liquidity and flexibility, it leans, uh, towards ETH.
And we don't think that applies to most markets, but it is, but it's part of the market, so we can cover both. And it also allows us to increase the staking percentage in ETHB to a level that captures, you know, a larger portion of the yield, probably higher than we would be comfortable with if we were to bundle all types of investors into one product, including people who might be less focused on getting that yield. So, from a behavioral perspective, is it a significantly different investor going into one or the other, or have you unlocked the ability for different people to choose different proportions of your funds to hold? Yes, we definitely don't see a pattern of big switching big switching . Um, most days when ETHB has been gaining assets, ETHB is also getting inflows.
Makes sense. Well, it was a great success, and to the extent that you guys continue to make it easier to access the crypto ecosystem, especially for all the people who don't, like everyone in this room, know how to do it on their own. It was a huge victory. I mean, it's been a long time since ETFs were launched, what this industry has looked like. So I guess I'd like to focus a little bit on tokenization.
You've obviously done a lot with tokenization. Bidd is tokenization. Bidd is the most successful tokenized fund, launched a few years ago, which has accumulated assets worth several billion dollars. You recently launched two new products, and without going into detail, many of them are focused on the money market. I'm curious, why is tokenized money so focused on Wall focused on Wall Street right now?
What makes them a great first place to enter the world of tokenization? So, I think that was, um, a very important and often underappreciated issue, which is that people take the generalized value proposition of tokenization and say, you know, it's faster, it's global, it's digital global, it's digital , it's instant 24/7 payments, it's programmable. Who wouldn't want that? We just have to apply this value proposition to everything and it will apparently take over the world. But in practice, it's not that simple, as there are significant frictions that offset some of the, you know, otherwise logical benefits of moving to a tokenized world tokenized world .
So we really need clear unlocks that tokenization makes possible in a particular asset class or application. And the strongest and clearest of them were immediately in money market funds. Why? Because it violates a historical trade-off historical trade-off that investors or depositors have had to grapple with, namely: Do I want the full yield of U.S.
Treasury bonds, or do I need perfect liquidity perfect liquidity ? And, um, historically even a money market fund that is quite liquid is still not liquid over the weekend. It's still kind of end-of-day type liquidity. Whereas now, with a tokenized monthly money market fund tied to a stablecoin, this ability to instantly convert between them and permanently hold your savings in a fully-fledged asset with the yield of US Treasury bonds, and then at the point when you really need it to make a payment, settle a deal, or do something else with cash, you have that ability. So it was a game changer, and that's why it grew so quickly.
Now it's over 10, uh, billion dollars as a category. As you mentioned, Bidd is one of the leaders in this field. Uh, we have more, uh Uh, we have more, uh , funds that we've submitted for consideration, which will allow them to be accessed by a more retail, uh, democratized audience, which we're very excited about. For other asset classes, I think there are hints of such unlocking, but they haven't been, uh, as decisive. And that's going to be the real test—how do we find those powerful unlocks to start extending the kind of success that we've seen with tokenized money market funds to other asset classes.
Uh, regarding Sharplink, you've been vocal in the past, but tokenization is obviously a big reason why you're so bullish on Ethereum. Uh, obviously, I think we both agree that it has huge potential to become an infrastructure layer for finance in the future. What do you think needs to happen for Ethereum to remain the best blockchain for tokenization? So I believe that Ethereum has a huge advantage over existing networks because, thanks to the network effect, over half of stablecoins, over half of transactions, the vast majority of real assets and tokenized funds are done on Ethereum. And as a result, liquidity begets liquidity.
So, I spent the first half of my career trading rates and credit, uh, in traditional finance traditional finance . And all of this was due to the network effect of trading with the largest balance trading a given thing. You wouldn't go to a very small broker trying to find something. You would go to the largest firms in a particular field, and they would be the ones who would have the stock. The same goes for Ethereum.
You're not going to trade on a small blockchain small blockchain that has a billion dollars in total secured assets secured assets if you have $250 million that you're trying to take out a secured loan on. Ethereum, being the largest, already has this leading position. But then we have to actually offer this added benefit of composition at scale, so that real assets become more valuable on the blockchain than off it. Now, I think a lot of people are using RWA as a blockchain access scheme, but for tokenized stocks, for example, there are n't that many people who trade tokenized stocks and have access to a Robin Hood account, unless they're hobbyists. I think a gradual step for us would be to see a lower lending rate on blockchain.
Or the next time there 's a GameStop-style short position where someone can earn 500% can earn 500% per annum on their capital, maybe you'll see equity-backed loans hit the blockchain. Maybe this person will no longer need to pay most of the returns into their brokerage account. It will be able to obtain full returns by creating a pool of loans. I think marginal cost should be what cost should be what attracts people to blockchain. Ethereum, with the largest liquidity pool and network, is the perfect place for this.
We cannot rest on our laurels because very little has actually been achieved in the grand scheme of global assets. We currently tokenize 0.1% of tokenize 0.1% of global assets. So we are barely touching the surface.
But I think if we can provide liquidity at blockchain scale, Ethereum is a natural place to do it. That's not even considering all the security benefits and things like that. These are purely network effects, assuming that people will be the best economic agents and will try to get the best value for their assets. I think that makes sense. And what is holding you back today?
I mean, you've started distributing funds on the blockchain, which is exciting. What's holding you back, uh, specifically at SH Sharlink, from distributing funds on a blockchain scale? So we made a certain distribution. So last year we did a $200 million deployment in Etherise LRT, merged with Etherise. We also did, uh, and we moved on to Lineia.
We just announced a $125 million private fund with Galaxy to deploy sixty to ten new protocols. So there is the cold start problem, where billions of dollars of capital are invested by venture firms in great founders to build great products. Very little of this money this money is ever allocated to the actual use of these protocols from day one. So we would like to be that capital. The thing is, in the process of regulation, auditing, etc.
, when we do it in a public company, we are usually doing something for the first time. When we created this LRT, no one had done this before from a corporate balance sheet. We were certainly the first to use the bridge of a qualified custodian. So every time custodian. So every time we do one of these things, it takes us a while to get approval from regulators.
In the case of our last assignment, the OCC, the banking regulator had to clearly approve this particular contract address, this particular bridge. So we're trying to pave the way in that regard, but we're certainly blocking a lot and taking on the solution because we're not going to lower our standards to do that. And in a lot of ways, that means we're trying to build infrastructure while we're doing these deployments. We're very excited about what this year will bring because I think we can do a lot more deployments given the momentum that regulators have. They are now in a position where they want to approve things.
They just want to approve things that are professionally suggested to them, not just approve things without hesitation and then a big event causes them to backtrack or disapprove things, which forces them to step over the hurdles and backtrack on a significant portion of their progress. So we call this the efficient frontier. We are trying to methodically work our way out of it, one level of risk at a time. This took us a little while. I will say that each deployment is faster than the previous one.
Our first one took us a very long time. The second one took a little longer, a little less. And I expect this trend to continue as precedents become fewer and fewer and we can just roll up our sleeves. I think to go back to your question from a tokenization perspective, what needs to happen for us to reach the next big wave? For example, what does BlackRock need to see for tokenization to really gain momentum?
Yes. So, a few years ago, we kind of came to this, uh, framework of four things that became critical barriers, that ultimately became critical unlocks, which were , focus on asset classes, custody, regulation, and, uh, listing on an exchange. And significant progress has been made. I mean, at that time there was virtually nothing invested in tokenization that wasn't just, you know, a very basic proof of concept, and now there's like 30 billion. This is progress billion.
This is progress . Where does it come from? First, there was a consolidation around the asset classes they focused on. So, in the early stages of tokenization, people were trying different things in literally everything: it was art, commodities, real estate at the property level, real estate at the fund level, loans, private investments, stocks, ETFs, bonds, bank loans, government debt, anything , someone was trying to tokenize. And that really fragmented the industry's efforts and prevented any real, uh prevented any real, uh , consolidation and focus on at least one asset class that we could say, "Look, here's the thing say, "Look, here's the thing that we used to hold and trade in a similar issue, and now we're mostly doing it in a tokenized way."
And the closest thing to that is happening in money market funds, right? So that's where the real focus is , and there's real progress being made now. I would say the question on exchanges was: would traditional exchanges be able to tokenize their existing securities first, or would crypto exchanges start licensing and developing infrastructure to support, uh, tokenization of securities alongside cryptocurrency? And it looks like the latter is happening. There is a huge acceleration of efforts from all major crypto exchanges.
So I would say that one of them is very close to being substantially resolved. And of course, these crypto exchanges already have hundreds of millions of users around the world, and opening them up to, uh, a different, much broader universe of asset types is exciting. Partial storage. It is obvious that all major crypto major crypto custodians, including institutional crypto institutional crypto custodians such as Coinbase, Anchorage, etc., support tokenized assets.
But, um, what we really need for institutional scale implementation is for all the traditional bank custodians to do this, and they are making efforts, but it's still, I would say, far from complete. This is critical because if you want traditional investment funds to incorporate some tokenized exposure into their existing structure, they typically won’t do so unless it can be accommodated and supported by their existing custodian. So that's a real, um, hurdle to overcome. And then the regulatory aspect, I try not to talk about your regulatory clarity at conferences because it's such a cliché, but, um, something that I think is a little bit missed. Yes, clarity would help with this, but clarity is not really a tokenization bill.
It is more about cryptocurrency. So, there are still a bunch of unresolved questions about how tokenization, uh, should function within a regulated perimeter that allows it to unlock the, uh, value proposition of the technology. So we'll see how it goes. But I would say that compared to when we first started using this framework, there has been significant progress. Well, I would just say that we are all lucky in this room because most people theorize about what needs to happen to see significant growth opportunities.
And in this case, if they tokenized Eyesshares, we would see a we would see a 10x increase in Ethereum revenue. So, in some cases, we just heard it firsthand. What is the list of criteria for attracting institutional capital to blockchain and the masses? Thank you. Yes.
And, uh, you know, we're at this point. It's an exciting moment, even though the sentiment in this space has been questioned, uh, you know, in a relatively recent perspective recent perspective . I think this will ultimately be a time lapse in the long run. But tell me, what are you most excited about in 5 years? I think for me it's agency finance that works in a way that it adds value to people who are not day traders are not day traders , who are not portfolio managers or day investors.
As it is now, I don't think many people trust agents to do things they don't really understand how to do themselves. Speaking at a high level, you should be able to actually test the work, hmm test the work, hmm , but I've already started to see this in my personal daily life. For example, it acts like a security agent now, essentially coming in and saying, "I think you're going to do something stupid." And this is today. In 5 years, I can imagine a world where I trust him to do things that I otherwise wouldn't want to do myself or wouldn't understand how to do myself.
And that gap is going to be huge because right now, if you wanted to entrust your credit card to your agent to take action down the chain, credit cards don't want you to do that. Well, they all create systems, but what happens if something goes wrong? They won't let you get your money back, or if you do , it undermines this whole system. So in my opinion, Ethereum benefits in the long run from its immutability, and once a transaction is complete, for better or worse, it's complete. So, in my opinion, a significant portion of these agency payments will not come from your agent making microtransactions on your behalf.
This is your agent who will carry out transactions that you did not have the time or ability to do yourself in the future. We are very close. The speed at which models are getting better and better better and better . This is honestly impressive. So I'm very happy about that.
And I think that will be a happy about that. And I think that will be a phased feature or two in terms of on-chain terms of on-chain payments. And so you can decide what interests you most over the next 5-10 years? I think that's absolutely right. This is the intersection of artificial intelligence and digital assets.
And, you know, while we're both passionate about digital assets, I think anyone who's studied it knows that AI is a topic that's a whole, uh, order of magnitude more important, or rather, more important. But digital assets play a big role in this, and, uh, a lot of this uh, a lot of this is agency commerce. We think about what AI is. This is internet intelligence, er internet intelligence, er , or machine intelligence. What is cryptocurrency?
This is machine, uh, money. So the synergy here is, uh, potentially huge potentially huge , and I think it's, uh, very logical, a place where a lot of cryptocurrency development should start to focus. Absolutely. Well, I think Absolutely. Well, I think we're on time.
I appreciate it, and, uh, it was nice talking to you. Thank you. Also.
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